U.K. still borrowing more than planned

The Associated Press
Published Wednesday, November 21, 2012 9:43AM EST

LONDON -- The British government continued to borrow more than planned in October as corporation tax collections fell sharply in the wake of a nine-month recession, official figures showed Wednesday.

The Office for National Statistics said borrowing in October was 8.6 billion pounds ($13.7 billion), up from 6 billion pounds a year earlier. Corporation tax revenue was down 10 percent, a sign that businesses continue to struggle - Britain only emerged from its latest recession in the third quarter of the year, with growth up a quarterly rate of 1 percent, largely on the back of a boost from the Olympic Games.

For the first six months of the fiscal year through October, the agency said the government's borrowing stood at 73.3 billion pounds, 5 billion pounds more than a year earlier. The increase comes despite a tough debt-reduction program which is the centerpiece of the government's economic strategy.

If that trend continues, full-year borrowing would be about 130 billion pounds ($207 billion), or 10 billion pounds above the government target.

Treasury chief George Osborne will give Parliament an update on his budget plans on Dec. 5 and investors will be keen to see if he revises up his borrowing projections.

Elsewhere, minutes of the last meeting of the Bank of England's rate-setting committee showed that one member backed another monetary stimulus. David Miles argued that there was enough slack in the economy that another 25 billion pounds injection into Britain's financial system would not stoke inflation.

So far the Bank of England has already plowed 375 billion pounds ($597 billion) into the purchase of bonds from financial institutions. The program, known as quantitative easing, is intended to push up the supply of money in the economy and raise lending.

However, the other eight members of the Monetary Policy Committee opted against another increase and noted encouraging signs, including lower than expected corporate insolvencies.

The panel also discussed dropping the base rate from half a percent, but unanimously voted for no change, the minutes showed.